How We Got To 13 SEER

The journey to the current 13 SEER legislation may illustrate more clearly than anything else why this industry and others dislike government interference so intensely.

The road to this new minimum standard involved two administrations, a lot of back-and-forth discussions, posturing, counter-posturing, an edict, reversal of the edict, a new edict, reversal of that edict, and then the final edict. Ironically, the process ended with the same minimum efficiency level proposed in the first place: 13 SEER.

Legislative Tremors

The process of raising the minimum efficiency standard for air conditioners and heat pumps began in 2000. In June of that year, The News reported that the Department of Energy (DOE) "has reignited the process that will raise the bar to higher standards," seven years after imposing its first round of minimum efficiency standards for residential-light commercial HVAC equipment.

The DOE didn't have much choice in the matter; it was required by law to reassess the standards, which were derived from the National Appliance Energy Conservation Act (NAECA).

"Updates to NAECA probably will become effective in 2006," The News stated. People who remembered the last market changes from NAECA round one collectively grimaced.

The annual meeting of the Air-Conditioning and Refrigeration Institute (ARI) was abuzz with discussion of the advance notice of proposed rulemaking. The meeting that year took place in San Antonio. ARI sages noted that the minimums that took effect in 1992 generated a fair amount of market turmoil.

At that time, they recalled, an overhang of minimum-efficiency equipment remained to be sold, and manufacturers had looked to recoup the cost of producing the newer, more-efficient equipment.

The biggest speculation in 2000 was just how high the new minimums would go. The rulemaking analyzed the impact of a range of SEER ratings, from 10 to 17 for central air conditioners, and up 16 SEER and 8.2 HSPF for heat pumps.

"While manufacturers have been bracing for efficiency minimums in the 11- to 12-SEER range," The News reported, "they may find themselves looking at 13 SEER - or at least debating this level." It was the beginning of a long road and several heated debates.

Refrigerant Concerns

This was particularly unwelcome news for unitary equipment manufacturers, who were already dealing with system redesigns caused by another set of government regulations: the Clean Air Act, which mandated the eventual phaseout of HCFC-22. The refrigerant was predominant in unitary air conditioners and heat pumps at the time, though R-410A was starting to make inroads.

Unitary equipment manufacturers at that ARI meeting, and beyond, argued that any new efficiency minimums should take into account the refrigerants now being used, and the hardships already being borne by manufacturers due to the switch away from R-22. In its proposed rulemaking, DOE said it would "seek to mitigate" the effect of impending regulations on the HCFC phaseout.

DOE said it also examined life-cycle costs (LCC) for consumer equipment at various efficiency levels. Generally, the higher the efficiency and first cost of the unit, the higher the LCC because of typically longer payback periods.

For instance, at a 12-SEER level for central air conditioners, industry data suggest that 31 percent of consumers would experience lower LCCs. (Reverse engineering suggested that an even higher number, 45 percent, had lower LCCs.)

At the 13-SEER level, 12 percent of consumers would have a lower LCC; reverse engineering indicated that 27 percent would be impacted on lower LCC. They did not speculate why this would occur, though several reasons seem plausible: better quality, better engineering, possibly better installation due to a better-trained contractor, and possibly better care after the installation.

Jim Crawford of The Trane Company states his case at the 2001 DOE hearing.

The First Battle

In January of 2001, it seemed that the Clinton administration would order a 30 percent increase in the minimum efficiency standard for central air conditioners and heat pumps - in short, to 13 SEER. Industry sources said this would "impose an unfair, multi-billion dollar burden on consumers," The News reported.

The increase from 10 to 13 SEER was approved for publication in the Federal Register by the DOE, with "strong backing from Energy Secretary Bill Richardson." However, the rule still could be challenged in Congress, which could overturn it, or be overturned in federal court.

Challenges were reported as being likely, and of course they came in due time.

ARI and most unitary equipment manufacturers certainly were not happy. They met with officials of the Office of Management and Budget (OMB) to protest the proposed increase. At the time, ARI and its members supported an increase to 12 SEER. They testified, refuting claims that the higher SEER was needed to prevent energy shortages during peak use. Moreover, they called foul on the process: They told OMB that DOE had not even proposed a SEER 13 for central air conditioners, and that there had been no public notice of it.

From 10 To 13 SEER

"Due to the prolonged silence from anyone in authority, we can only presume the worst," said Ed Dooley, now-retired vice president of communications at ARI.

"This will be a cruel blow for working families and those on fixed incomes for whom air conditioning can be a lifesaver. We should not adopt a federal standard that discourages people from replacing older, less-efficient units and denies them the choice of models that best suits their needs.

"A more moderate approach, such as 12 SEER, makes sense in a country as varied as the United States." ARI also pointed out that there is more than one way to achieve higher efficiency. If Congress enacted tax incentives and the states would encourage the purchase of higher-efficiency equipment, more people would be inclined to buy equipment whose efficiency was higher than 12.

The institute also pointed out the importance of proper installation of central systems to achieve full efficiency gains of the equipment - perhaps to drive home the idea that without proper installation, having higher efficiency equipment is an exercise in futility. It urged the DOE to support certification of installers and maintenance personnel through North American Technician Excellence (NATE).

Of course, there were plenty of people who supported the 13 SEER regulation. In a statement to the Washington Post, David M. Nemtzow, president of the Alliance to Save Energy, said, "If the administration had done this in 1994, by our projections, it would have lowered California's peak electric demands by 400 megawatts today."

Clifford H. "Ted" Rees, president of ARI at the time, may have been among the most vocal critics of the 13 SEER decision. By ordering a 30 percent increase, Rees said the DOE "is enacting a cruel penalty on millions of Americans for whom air conditioning is a necessity, indeed a life saver in heat waves. This will be a very hard blow to many Americans living on low and fixed incomes in rural and urban settings."

The action by DOE came in the final hours of the Clinton administration. "In a desperate race to act before the Clinton administration leaves office, DOE enacted a standard it cannot justify, ignored its own analysis for a fair standard, threatened lost jobs for several hundred thousand workers, and taxed consumers with costs that could exceed $5 billion," said Rees. "This unjust rule will be challenged in Congress and the courts because it is unreasonable, unfair, and defies the rule-making process DOE is sworn to uphold."

The Payback Questions

ARI said it supported enactment of the original minimum standard and its increase to 12 SEER, but it said DOE's 13 SEER requirement would eliminate 84 percent of all central air conditioner models and 66 percent of all heat pump models.

"This is sleight-of-hand rulemaking at its worst," said Rees. "DOE ignored a Justice Department warning of an adverse impact on competition and its recommendation that DOE consider a more moderate standard. Furthermore, DOE failed to follow its own procedures to ensure that analyses are done in a timely and open process."

ARI said the rule would force consumers to purchase units with payback periods of nine to 14 years, possibly longer than that in areas that don't use as much air conditioning. It said DOE violated its Process Improvement Rule by allowing only nine working days for public comments on complex analyses that DOE had not included in its Notice of Proposed Rulemaking.

From 13 SEER To 12 SEER

Many industry folks hoped that incoming President George W. Bush would take steps to return the proposed efficiency rating to 12 SEER.

ARI's Dooley said it was common for a new administration to put regulations on hold that have been published in the Federal Register but which haven't taken effect yet.

The purpose, he explained, is to scrutinize any last-minute flurry of regulations that are acted on by a lame duck administration. Rather than taking effect 30 days after publication in the Federal Register, the effective date is pushed back to 60 days.

"Under that directive, the effective date of the regulation is postponed for 60 days, giving DOE time to review, moderate, and even rescind the rule drafted under the Clinton administration," said Dooley. "Thus, the status of the standards - which do not take effect until Jan. 1, 2006 - is unclear. DOE could reopen the rulemaking process for public comment, affirm, or change the rule just as Congress could also take up the issue and disapprove the rule by a majority vote."

The Bush administration's DOE did indeed propose a 12-SEER minimum in April 2001.

Secretary of Energy Spencer Abraham said that the new standard "will provide a 20 percent increase in energy savings and help to dramatically reduce electricity demand during peak periods." He said his department's main focus during the review was to maximize energy efficiency while minimizing future price increases for consumers, particularly those with low incomes, which is what many in our industry wanted to hear.

ARI welcomed the new proposal: "A SEER 12 standard achieves significant energy-efficiency gains and keeps lifesaving cooling equipment within reach of consumers, particularly those who need it most - the elderly and working families on limited incomes."

"If consumers cannot afford equipment at a reasonable cost, there will be no incentive for them to replace their less-efficient unit, and energy use will increase rather than decrease," ARI said, adding that the adoption of a 13 SEER rule would cost the manufacturing industry $350 million and eliminate 84 percent of all new central air conditioning models, and 66 percent of all new heat pump models. "Some manufacturers could be forced out of business," ARI warned.

The ARI team, led by Deborah Miller (right), explains its position in 2001.

Unhappy Campers

Not everyone in the HVAC industry was happy about the change. Goodman Manufacturing was the first to break from ARI's position. John Goodman, chairman of the company, told The News that he didn't know of others in the industry siding with him in advocating 13 SEER, but added, "Almost everyone [among environmental and consumer groups] believes in what we are saying, other than a few people."

David M. Nemtzow, president of the Alliance to Save Energy (ASE), an extremely vocal consumer-environmental group, called the Bush administration's decision to reduce air conditioner and heat pump standards from the earlier proposed levels "an outrage." "This is bad policy and it's illegal," the organization said.

Bill Prindle, ASE director of Buildings and Utilities, explained that the National Appliance Energy Conservation Act (NAECA, 1987) prohibits any new standard that would reduce the energy efficiency of previously published rules. The Clinton proposals were published for comment Oct. 5, 2000, with the comment period ending Dec. 5. The final rule was published in the Federal Register in January 2001, before the Clinton administration left office.

Nemtzow called the action a "cruel blow" to both consumers and the reliability of the U.S. electricity grid. He said the action would not only cost American consumers more than $700 million in annual electricity bills, but would also create more pollution.

Andrew deLaskie, director of the Appliance Standards Awareness Project, a coalition of consumer and environmental groups, also questioned the legality of the new administration "attempting to ease a regulation adopted as final in January."

"I can't think of a more clear-cut case of where special interests have gotten their way at the expense of the public," deLaskie told the Associated Press. "After a month of analysis, they're going to turn back what was developed after six years. That's reckless."

Chris Pamplin of American Geothermal DX speaks in support of 13 SEER.

States Sue Over Reduction

In June 2001, New York Attorney General Eliot Spitzer, California Attorney General Bill Lockyer, Connecticut Attorney General Richard Blumenthal, the Natural Resources Defense Council, and other national environmental and consumer groups filed lawsuits against the Bush administration over its decision to reduce the Clinton administration's proposed 13 SEER mimimum efficiency standard to 12 SEER.

"This is a time when the federal government should be doing everything possible to encourage the efficient use of energy," Spitzer said. "Instead, the Bush administration has dramatically weakened one of the most effective ways to conserve energy.

"With this lawsuit, we are seeking to compel the administration to adopt a more forward-looking course that will help lower energy bills and reduce air pollution."

The states' attorneys general said that federal law establishing the process for the standard prohibits the federal government from rolling it back. Lockyer said, "By ignoring and trying to eliminate the toughened efficiency standard for air conditioners, the Bush ad-ministration is unnecessarily making it harder for California."

The states' lawsuit was filed in the United States District Court in Manhattan. The Natural Resources Defense Council, the Consumer Federation of America, the Association for Energy Affordability, and the Public Utility Law Project filed a similar lawsuit.

Lawmakers Take Action

Meanwhile, in the Energy and Air Quality Subcommittee of the House Energy and Commerce Committee, Rep. Edward J. Markey (D-Mass.) presented an amendment to reinstate the 13 SEER standard. It was defeated by a vote of 19 to 12. The 13-SEER standard "was already on the books, should stay on the books, and we should stay with it," said Markey.

Republicans said that the Bush administration's proposed standard was adequate. "The notion that the Bush administration has rolled back a lot of environmental standards is just a lot of poppycock," said Rep. Billy Tauzin (R-La.), chairman of the full committee. (In the full Energy and Commerce Committee, Markey introduced a similar amendment and again lost, this time by a vote of 32 to 23.)

Also in the same subcommittee, an amendment by Rep. Ed Bryant (R-Tenn.) to change the standard for air conditioners acquired by the federal government from 13 to 12 SEER, and to add exemptions for applications considered impractical due to cost, space constraints, or national security reasons, was accepted by a vote of 16 to 15.

At the time, DOE's Federal Energy Management Program (FEMP) had already started promoting 12 SEER to federal agencies upgrading their A/C units. In its guidelines on how to buy energy-efficient equipment, FEMP's cost-effectiveness example listed 12 SEER as the recommended level.

On July 25, 2001, DOE officially published the proposed 12 SEER rule in the Federal Register. The proposal was strongly endorsed by ARI.

DOE also invited public comment, and it set up a 75-day comment period instead of the anticipated 60 days. Comments had to be received on or before Oct. 9, 2001.

Oral views, data, and arguments were scheduled to be presented at a public hearing in Washington, D.C., on Sept. 13, 2001. The date was made, but it would not be kept.

Terrorist attacks in New York and Washington on Sept. 11 ground the nation's transportation to a standstill. The debate suddenly became much less important in the big picture, but its significance would again grow as energy use and national security would cross paths.

Is The Tide Turning?

The following spring, California weighed in with a proposed higher state standard of 13 SEER. Plus, the U.S. Senate began debating its energy bill, including proposed language that would legislate 13 SEER nationally.

The California Energy Commission (CEC) voted to revise its Title 20 Appliance Energy Efficiency Standards to apply a standard of 13 SEER for residential split-system and single-package air conditioners and heat pumps of less than 65,000 Btuh. Commercial air conditioning and heat pump units from 65,000 to 135,000 Btuh would have a higher standard of 11 EER, with a 10.8 EER for products between 135,000 and 240,000 Btuh.

To initiate a separate and higher state standard, the CEC would have to get a waiver from the DOE exempting it from federal standards. The action would open the door for other states to adopt separate standards.

California's proposed exemption "would impose too much of a burden, including detrimental effects on consumers and manufacturers," Dooley said. "The United States is now served well by having one rule, not 50, with huge energy savings over the past decade thanks to a national standard that is fair and economically justified."

The Senate energy bill introduced by Senators Tom Daschle (D-S.D.) and Jeff Bingaman (D-N.M.) included a section with a 13 SEER standard for central air conditioners and heat pumps manufactured on or after Jan. 23, 2006. However, an amendment to the energy bill would strike 13 SEER language in April 2001.

"To say we are disappointed is an understatement," said Goodman, pointing out that there was still a lawsuit pending in federal court that would require the DOE to implement the 13 SEER standard initiated at the end of the Clinton administration.

The Big Upset

In May 2002, it looked like 12 SEER was a done deal. The DOE set the new standard for central air conditioners and heat pumps at 12 SEER. Connecticut, New York, and Vermont filed a challenge in federal court to keep the standard at 13.

In a rule published on May 23 in the Federal Register, the DOE established that a SEER of 12 would be the standard for residential central air conditioners and heat pumps manufactured for distribution in the United States beginning in 2006.

There was much rejoicing, or gnashing of teeth, depending on which side of the question one was on. It would not be long-lived, as the legislation turned into one of the greatest upsets in legislation affecting the HVAC market.

"At a time when we should be doing all we can to conserve energy and achieve energy security, it is counterproductive for the Bush administration to roll back a crucial appliance efficiency standard that would save an enormous amount of energy," New York's Spitzer declared. "Not only is this regulatory move a step backward, it is also illegal, since federal law prohibits agencies from weakening appliance efficiency rules and mandates more aggressive conservation levels."

On Jan. 13, 2004, the U.S. Appeals Court for the 2nd Circuit, based in New York, ruled that

the DOE did not follow "proper procedures" when it adopted its 12 SEER standard in May 2002. The more stringent 13 SEER standard was back in place.

"We are disappointed that such an important decision affecting homeowners in all 50 states should be determined on process rather than on the impact of the regulation on millions of people," stated ARI president William Sutton. "We will take some time to review the court's decision with counsel and then make a decision on what options best serve consumers and energy conservation."

Added Dooley, "We are considering what to do. Our lawyers need to get a copy of the ruling and discuss our options."

Challenge Withdrawn

On March 17, 2004, ARI announced that it was withdrawing its challenge. "Due to the likelihood of a long and uncertain legal process, ARI will no longer pursue litigation in the U.S. Court of Appeals for the 4th Circuit in Richmond, Va., so that manufacturers can prepare for a new, 13 SEER national minimum efficiency standard for residential central air conditioners and heat pumps that will go into effect on Jan. 23, 2006," said Sutton.

"The industry needs to know with certainty what the standard will be in order to meet the needs of the marketplace. Because of the approaching effective date and the uncertainty of the court action, ARI has withdrawn its request for review of the 13 SEER rule by the U.S. Court of Appeals for the 4th Circuit in Richmond, Va."

According to ARI, the DOE excluded "space-constrained products" no greater than 30,000 Btuh from the 13 SEER requirement, stating that these products, which include through-the-wall packaged and split, ductless split, and single package equipment would be covered by subsequent rules.

Carrier Corp. had dropped its challenge to the 13 SEER standard on March 11. Geraud Darnis, president of Carrier, stated, "A 13 SEER standard is the right environmental choice. It provides significant energy savings for the country while reducing energy bills for homeowners." He also pointed out the possibility that the 4th Circuit Court challenge could result in the standard reverting back to the 10 SEER minimum.

"Given the choice between 10 SEER or 13 SEER, we think the industry should support higher efficiency," he said.

Publication date: 08/15/2005

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